The primary purpose of this blog (Prithviraj Kothari - MD, RSBL | Bullion market blog) is to educate the masses of the current happenings in the Bullion world.
This blog contains my opinion, which is not to be construed as investment advices.
Information provided in these blogs is intended solely for informative purposes and is obtained from sources believed to be reliable

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Monday, 16 July 2012

GOLD LOSES ITS GLITTER

Gold
and silver did not show much volatility from 2nd to 7th July. Post the Wednesday close (4th
July), gold and silver tumbled down, Reasons cited for this were the ECB rate
reduction from 1% to 0.75% which in turn affected the Euro, oil and precious
metals.

Moreover,
the U.S payroll report stated that only 80K jobs were added which means that
though there was a development, it was at a slower pace.

This week’s
movement relied on the minutes of the FOMC Meeting, China's GDP for the second
quarter, Euro Council Meeting and the U.S trade balance.

Gold and silver moved in
different directions for the second straight day but both metals did not do much during the week. On a monthly scale both precious metals slightly
declined

It was a mild “risk-off” trading day in the
market place on Thursday. Wednesday afternoon’s FOMC minutes from the Federal
Reserve that confirmed a sluggish U.S. economy was responsible for
this, but provided no fresh clues on any upcoming Fed monetary-policy-easing
moves. Most market bulls wanted the Fed to signal it’s embarking on another
round of quantitative easing, better known as QE3.

Fears
of weakening world economies exhibited modest risk aversion in the markets
which in turn led to a moderate downfall in gold futures on Thursday.

Like other
commodity markets, gold declined and proved to be a risk asset rather than a
safe haven asset.

Spot
Gold was last quoted at $ 1,567.50 on Thursday.

However, Friday had somethething else in basket for gold .Risk taking in the marketplace following the release of the Chinese GDP figure on Friday, resulted in the price of gold gaining close to $20 an ounce for the day. Investor confidence in the global economic recovery was boosted following the Chinese news, which came in close to its expected level. The precious metal ended up finishing the week at $1589.26.This week, analysts are warning that gold may not be able to extend Friday's gains. While the Chinese GDP figure was viewed as positive by many investors, it still did not signal any expansion in the global economy. Given the current state of the euro-zone, as well as fears that the region's debt crisis could spread further, gold may reverse some of its gains in the coming day

In India, onset of the monsoon plays
an important role in the economic growth. The gold market too, will be paying
attention to the outcome of India’s
monsoon season.

Good monsoon season is positively correlated with
agricultural crop yields, in turn farmers’ incomes and higher gold demand. Rural
farming areas account for approximately 60% of Indian gold buying. However, So
far, the monsoon season is not off to a good start, with rainfall to July 10
reported by be 23% below average, although sowing levels, which are also
important factors for agricultural yields, are pretty much in line with last
year. The India Meteorological Department has said that the monsoon is likely
to pick up in July and August, forecasting 98% and 96% of respective monthly
averages. So for gold, while the initial indicators aren't so good,
there's still time for some optimism to grow.